Steady property market growth seen outside NCR

By Revin Mikhael D. Ochave, Reporter

REAL ESTATE brokerage and consultancy firm KMC Savills is expecting continuous growth for property markets outside Metro Manila amid the expansion of the information technology and business process management (IT-BPM) sector in the countryside. 

KMC Savills Managing Director Michael McCullough said during a virtual briefing on Thursday that the company foresees the sustained expansion of IT-BPM companies outside the National Capital Region (NCR).

Metro Cebu, Metro Clark, Davao, Iloilo, and Bacolod are the areas included in the firm’s report on the future of Philippine regional cities.

“One of the things that we are so excited about is that the provincial areas did better than Metro Manila. There’s been more activity happening outside Metro Manila. It’s all been to the provinces. Companies want to go where the best employees are,” Mr. McCullough said. 

“A lot of people during the pandemic returned to the provinces. That’s where the companies want to move back to. There’s been available decent quality (office stock), IT-grade, and companies have taken advantage of the lower rates to set up offices where their employees are located. This reduces attrition and lowers costs. We expect this to continue,” he added. 

Aside from IT-BPM firms, other industries that are expanding their office space in provinces include providers in the flexible office, e-commerce, and logistics sectors. 

“Flexible office providers are expanding slowly but surely in these regional provinces because they do know that there is demand for them to expand there,” said KMC Savills Chief Operating Officer Cha Carbonell.

“E-commerce and logistics providers who need satellite offices in those areas are also expanding in the regional areas. The demand [for] office space is still predominantly occupied by the IT-BPM sector,” she said, adding that other types of industries help in the absorption of office space in regional cities.

The report showed that the Metro Cebu property market is expected to withstand any supply pressure as the IT-BPM sector increases its presence.

Metro Cebu logged a 20.9% vacancy rate in the first half of the year and 1.25 million square meters (sq.m.) of current office stock. 

“Due to the recovery in demand, Cebu’s vacancy rate is forecasted to return to pre-pandemic levels by 2025,” KMC Savills Executive Director John Corpus said. 

For Iloilo City, KMC Savills said the overall vacancy rate improved to 8.1% in the first semester after the completion of Cybergate Iloilo Tower 2 in Pavia. The city currently has 209,700 sq.m. of office stock.

“Grade B stock saw a massive drop in its vacancy rate to 13.1% from 22.7% at the end of 2022. The report is optimistic that vacancy rates should remain in single digits despite another 22,500 sq.m. of new office space in second half of 2023,” KMC Savills said. 

The report said that Bacolod logged a 13.5% vacancy rate in the first half amid struggling demand, which is projected to improve in the coming quarters. The area has 187,128 sq.m. of current office stock. 

“Leasing activity may improve in the coming quarters as demand is expected to spill over from neighboring Iloilo. Conditions are expected to be static in the next term, but leasing activity has picked up in recent months,” KMC Savills said.

For Davao, KMC Savills said the overall vacancy rate fell to 6.4% in the first half from 12.1% at the end of last year. The area has 231,384 sq.m. of current office stock. 

“Davao remains one of the most affordable markets in the country amidst the influx of demand from outsourcing firms. Unlike the other office markets in VisMin, Davao still lacks a sizeable cluster of townships that can command above-average rates,” KMC Savills said.

“However, KMC Savills forecasts that the current demand trend may be an opportunity for developers to rethink their strategy in the region,” it added.

Meanwhile, the report said that Metro Clark has logged a 33.6% vacancy rate in the first half. The area has 432,058 sq.m. of current office stock.

“Office buildings outside of Clark Freeport Zone have performed better with their vacancy rate averaging 25.3% in the same period. Although the overall vacancy rate is higher than some submarkets in Metro Manila, leasing activity in Metro Clark has been healthier in the capital — albeit at specific locations only,” KMC Savills said. 

“Overall, KMC Savills reports that the total office stock in Iloilo, Bacolod, and Davao are not as sizeable as Metro Cebu or Metro Clark, however, the increased demand for these markets should trigger developers to construct new Grade A office buildings or introduce new business districts,” it added.